Main types of Stablecoins

1. Fiat-Collateralized Stablecoins: These stablecoins are backed by fiat currencies like the US dollar. They maintain a reserve of a fiat currency, and each unit of the stablecoin represents a claim on a specific amount of that currency. Issuers of USDT, USDC & PYUSD, claim that each token is backed 1-1 with FIAT USD.

2. Commodity-Collateralized Stablecoins: These stablecoins are backed by commodities such as gold or oil. Each unit of the stablecoin represents a claim on a specific amount of the commodity. Issuers of XAUT & PAXG, claim that each token is backed 1-1 with their respective commodity.

3. Crypto-Collateralized Stablecoins: These stablecoins are backed by other cryptocurrencies. Due to the volatility of cryptocurrencies, these stablecoins are often over-collateralized to absorb large price swings. Examples are LUSD, DAI & sUSD.

4. Non-Collateralized Stablecoins: These stablecoins are not backed by any collateral. Instead, they use algorithms to automatically adjust the supply of the stablecoin, aiming to keep its price stable. Examples are FRAX, MIM & ALUSD.

5. Hybrid Stablecoins: Combining features from multiple types, hybrid stablecoins aim to leverage the strengths of different models while mitigating their weaknesses, offering a diversified approach to stability. This type of stablecoin is not recommended to use. An example used to be Luna TerraUSD, it was a, extremely sophisticated, ponzi and it failed.